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LILLY PLEADS GUILTY TO PROMOTING OSTEOPOROSIS DRUG FOR OFF-LABEL USES

Eli Lilly has entered into a plea agreement with the federal government to resolve
charges that it promoted its osteoporosis drug Evista for uses not approved
by the FDA.

Under the plea deal with the Department of Justice's Office of Consumer Litigation
and the U.S. Attorney's Office for the Southern District of Indiana, Lilly plead
guilty to a misdemeanor charge that it marketed Evista (raloxifene HCl) in 1998
for the prevention and reduction of breast cancer and cardiovascular risks.

Evista, which is on pace to generate more than $1 billion in worldwide sales
in 2005, is approved in the U.S. only for the prevention and treatment of osteoporosis
in post-menopausal women.

In addition to the misdemeanor charge, the government filed a civil complaint
alleging that similar Evista-related misconduct continued into 2000. Although
Lilly said it disagreed with the civil complaint, the company reached a settlement
with the government to resolve the allegations. The settlement calls for Lilly
to pay $36 million in fines. The company recorded a charge in the fourth quarter
of 2004 to cover the settlement costs.

As part of the overall settlement, Lilly has also agreed to enter into a five-year
corporate integrity agreement (CIA) related to Evista. The CIA requires Lilly
to undertake comprehensive compliance-related activities designed to ensure
that its marketing and promotional practices for Evista comply with promotional
laws and regulations. The activities include employing a chief compliance officer
who reports directly to Lilly's CEO; maintaining a corporate compliance committee;
creating a code of conduct specific to promotion and marketing; and establishing
disciplinary and corrective action processes.

"We deeply regret the 1998 conduct, which has resulted in a federal misdemeanor
charge," Lilly Chairman and CEO Sidney Taurel said in a recent statement.
"We take seriously our responsibilities to abide by all the laws governing
our business practices and are committed to ensuring our employees' actions
reflect the highest legal and ethical standards of conduct. Although the government
has not charged Lilly with any unlawful intent, we will continue to take steps
designed to assure that Lilly's promotional activities remain fully compliant."

Lilly's plea agreement is subject to approval by the U.S. District Court for
the Southern District of Indiana. The company said it anticipates a hearing
on the settlement within the next few weeks.